Blank Check Preferred Stock

Blank Check Preferred Stock

A method companies use to simplify the process of creating new classes of preferred stock to raise additional funds from sophisticated investors without obtaining separate shareholder approval.

Notes:

To do this a company must amend its articles of incorporation to create a class of un-issued shares of preferred stock whose terms and conditions may be expressly determined by the company's board of directors.

This kind of stock can also be created by a public company as a takeover defense in the event of a hostile bid for the company (poison pill).

See also: Anti-Takeover Measure, Articles of Incorporation, Hostile Takeover, Poison Pill, Preferred Stock, Takeover

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Blank Check Preferred Stock

This is stock over which the board of directors has broad authority to determine voting, dividend, conversion, and other rights. While it can be used to enable a company to meet changing financial needs, its most important use is to implement poison pills or to prevent takeovers by placement of this stock with friendly investors.